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The Honolulu Advertiser
Posted on: Thursday, April 6, 2006

U.S. drivers can stand $3 gas, Tesoro CEO says

Associated Press

WASHINGTON The head of Tesoro Corp. said yesterday he would not expect $3-a-gallon gasoline to cause a major decline in demand this summer.

American consumers "have accepted a little higher price," said Bruce A. Smith, chairman and CEO of San Antonio-based Tesoro, one of the country's largest independent refining companies.

Smith emphasized he was not making a prediction about where prices are headed.

Smith said motorists no doubt dislike paying more than $2.50 a gallon these days, but that he believes the short-term alternatives buying a hybrid gas-electric vehicle or carpooling are unappealing to the average American either from an economic or lifestyle perspective.

And not only is energy a relatively small percentage of most U.S. household budgets, Smith said, but "our gasoline, by world standards, is cheap."

The average price in the U.S. for regular unleaded is $2.59 a gallon, or 37 cents higher than last year, according to the Energy Department. By contrast, gasoline in Britain costs about $6 per gallon, and in Brazil it costs nearly $5 a gallon. The higher prices reflect higher taxes.

Smith said the two major forces propping up the price of gasoline in the U.S. are the cost of crude oil and the limited amount of refining capacity around the world, and he does not anticipate any near-term change in these underlying factors.